The surge Iraq really needs: U.S. business

Tags:

Today’s Iraq is divided in dozens of ways: Arab and Kurd; Sunni, Shia and Christian; pro-Saddam and anti-Saddam; rich and poor. Yet so many Iraqis I have met are united around one thing: a nearly universal desire to see U.S. business grow in Iraq. They want American stores on their streets, American products in their homes and American technology in their factories. They dream that General Electric will provide their power, General Motors produce their cars and Google drive their business online. They want American business to treat Iraq as a real market, to build Iraq with Iraqis. Our policy towards Iraq should be shaped by that sentiment, as a surge of American business would provide unprecedented benefit to U.S. policy in the region and potentially compelling returns to the U.S. private sector.

American business can win the Iraqi street to a degree that neither military nor diplomatic engagements have. There have been protests throughout the Arab world; Iraq is one setting where the U.S. can substantively address the root of discontent through business engagement and job creation.

Further, business engagement limits Iranian influence in ways that a military presence cannot. An economic future that holds opportunity for all of Iraq’s communities is good for American interests. Take, for example, gypsum, a soft mineral used to produce building materials. Iraqi Sunni regions do not have the oil resources of the Kurdish north or Arab Shia south. Yet they do have an abundance of gypsum deposits, a mineral wealth that is among the highest quality in the world. Many of these deposits sit underdeveloped because Iraqis have neither the capital resources nor the equipment to revive the gypsum trade. Meanwhile, to build their homes, offices, hospitals and schools, Iraqis import gypsum from Iran, the world’s second largest gypsum producer. Clearly there is a strategic and economic opportunity here for the finest gypsum mining and production firms in the world, which are in the United States.

Policy aside, there are impressive return models that appeal to private business. For emerging market investors, the Iraqi opportunity is unprecedented. By conservative estimates, Iraqi oil production will double over the next six years, to 5.3 million barrels per day, which would make Iraq the third largest oil producer in the world. The revenues from such production will flow through the Iraqi national budget, creating extraordinary private business opportunity to re-build Iraq’s infrastructure.

American firms, thus far, have largely stayed away, even as companies from other foreign nations engage. According to Dunia Consultants, there was $42.7 billion of private investment reported in Iraq in 2010. U.S. entities invested $2 billion, which is less than that of South Korean firms and much less than half the capital that Turkish, Italian or French firms deployed. The inefficiency of doing business in Iraq and lingering security concerns likely contribute to U.S. firms’ reticence.

While critics of the 2003 invasion of Iraq accused its proponents of engaging in war for economic benefit, we now seem to have done the opposite: losing the lives of thousands of public servants and spending over $1 trillion of taxpayer funds for the primary economic benefit of foreign nations. There are three things the U.S. government can do now to improve its promotion of American enterprise in Iraq.

First, there should be increased Commerce Department participation. There are over 40,000 American soldiers and thousands of diplomats in Iraq today. And there are a total of two Commerce Department officials in Baghdad to facilitate all American business in Iraq. (While Commerce might not normally have a large presence in insecure regions, the State Department and Department of Agriculture have illustrated an ability to engage effectively in large numbers in both Iraq and Afghanistan.) As a result, no U.S. government representative in Iraq has a portfolio to facilitate broad strategic private sector engagement for public benefit.

Second, a limited program of tax incentives for companies investing directly in Iraq would align private shareholders’ interests with our national interest, tipping risk equations in favor of investment and facilitating long-term taxpayer savings.

Third, a range of insurance products, including insurance for political, legal and security risk, should be more broadly available to American firms investing in Iraq. The World Bank, the Overseas Private Investment Corporation and private insurers provide limited offerings. Increased awareness and availability of such insurance will further facilitate more substantive private sector spending in Iraq.

Five weeks after his inauguration, President Obama set forth a foreign policy in Iraq based upon sovereignty, stability and self-reliance. With a dwindling American military presence and with attention focused on the transition to normalized diplomatic ties, the Obama administration has a unique window of opportunity to address those objectives, to facilitate a surge in Iraq that addresses both American objectives and Iraqi dreams.

These are cogent ideas that are on point. If we all were to look at other human beings in the same manner we look at ourselves, we’ll surprise ourselves with the remarkable insights we’ll gain about handling what we ordinarily regard as intractable problems. As the ‘Arab Spring’ has demonstrated, the Arab community as a whole needs the same things we all desire for ourselves. The emerging post-Saddam Iraqi needs the same interventions as we are contempating for post-recession America. Perish the rehearsed briefs about Bin Laden-inspired Arab youth; welcome Adam Smith-inspired world!